Health Insurance

Rescinded 1981

Where a participating hospital has a policy of limiting its charges to the
extent of the patient's coverage under commercial health insurance or
health insurance under title XVIII of the Social Security Act and waiving
collection of all its charges in the case of indigent patients who have no
such insurance coverage, held, section 1862(a)(2) of the Social
Security Act does not bar payment on behalf of a beneficiary for covered
services furnished by such hospital, since such services are not services
for which the beneficiary has no legal obligation to pay and which no
other person has a legal obligation to pay for or provide.

The X Hospital, a private non-profit institution, is a participating
hospital in the Health Insurance for the Aged Program under title XVIII of
the Social Security Act. It is the policy of the hospital to waive
collection of its charges to indigent patients who have no health
insurance coverage of any kind. However, in the case of patients who have
health insurance, the hospital limits its charge to the extent of the
patient's coverage under commercial health insurance and to the extent of
his coverage under title XVIII of the Act. Upon admission to the hospital
the patient signs an admission form under which, in substance, the patient
agrees to pay and to be liable for all bills and charges, and by which the
hospital agrees voluntarily to limit these bills and charges to the extent
of his health insurance coverage.

Section 1862(a) of the Social Security Act provides in pertinent part
that:

Notwithstanding any other provision of this title, no payment may be made
under Part A or Part B [of title XVIII of the Act] for any expenses
incurred for items or services—* * *

(2) for which the individual furnished such items or services has no legal
obligation to pay, and which no other person (by reason of such
individual's membership in a prepayment plan or otherwise) has a legal
obligation to provide or pay for; * * *.

In the light of the hospital policy, a question has been raised as to
whether section 1862(a)(2) (supra) precludes payment on behalf of a
beneficiary whose liability to the hospital does not extend beyond his
coverage under title XVIII. The answer to this depends upon whether the
services provided under the circumstances described herein are services
for which the individual has no legal obligation to pay and which no other
person has a legal obligation to provide or pay for.

Under the terms for admittance to X Hospital, a patient specifically
assumes liability for all charges, but the hospital in turn commits itself
to limit its charges to the extent of the patient's health insurance
coverage. It would appear, therefore, that the hospital does charge for
its services, but conditions collections within limits governed by the
patient's commercial health insurance coverage and health insurance
coverage under title XVIII of the Social Security Act. The fact that the
hospital waives collection of its charges in the case of indigent patients
not having hospital, medical, or surgical insurance coverage does not mean
that the hospital intends to waive collection of its charges in the case
of individuals who have insurance coverage under title XVIII of the Social
Security Act.

Thus, it is apparent, the X Hospital does not provide services
gratuitously for insured individuals, and, therefore, it cannot be said
that the services provided are services for which "the individual" * * *
has no legal obligation to pay, and which no other person * * * has a
legal obligation to provide or pay for; * * *." Held,section
1862(a)(2) of the Social Security Act does not bar payment on behalf of a
beneficiary under title XVIII of the Social Security Act for covered
services provided at the X Hospital.

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